Melewar Industrial Group proposes share capital reduction, rights issue

KUALA LUMPUR (Jan 31): MELEWAR INDUSTRIAL GROUP BHD [] (MIG) has proposed a corporate exercise involving a share capital reduction and a renounceable rights issue of up to 150.348 million new shares.

MIG said on Tuesday the rights issue, at an indicative price of 40 sen per rights share, the rights share would enable it to raise between RM21.97 million and RM60.14 million.

As for the share capital reduction, this would involve cancelling 75 sen of the par value of every existing RM1 share. The share capital reduction would not result in any adjustment to the share price and existing number of shares issued in the company.

MIG explained that its shares had been trading on Bursa Securities below its existing par value of RM1 per share since April 15, 2011. The last traded price on Jan 27 was 53 sen, which was a discount of 47.0% to the par value of RM1 per share.

“The current market price of MIG's shares is, therefore, not conducive for MIG to embark on any fund raising exercise and/ or corporate exercise involving new issuance of shares,” it said.

MIG added the proposed share capital reduction would enable it to undertake the rights issue at an indicative price of 40 sen each.

It said the renounceable rights issue of 150.348 million new shares would be on the basis of two rights shares for every three existing shares held.

As at Jan 27, 2012, MIG’s paid-up was RM226.75 million, comprising 226.755 million shares of RM1 each including 1.23 million treasury shares.

The board has resolved to cancel all the existing 1.23 million treasury shares prior to the implementation of the proposals, which would reduce the paid-up by 1.23 million.

As for the share capital reduction, MIG said that 75 sen of the par value of every share of RM1 each would be cancelled.

Upon completion of the proposed treasury shares cancellation, the proposed share capital reduction will reduce the paid-up to RM56.38 million, comprising of 225.522 million MIG shares.

“The proposed share capital reduction will give rise to a credit of RM169.14 million which will be transferred to a non-distributable capital reserve account of MIG,” it said.

MIG added the proposed rights issue would be implemented after the completion of the proposed share capital reduction.



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AZRB confirms RM746m MRT contract

KUALA LUMPUR (Jan 31): AHMAD ZAKI RESOURCES BHD [] (AZRB) has confirmed that it was awarded part of the multi-billion ringgit Klang Valley Mass Rapid Transit (MRT) project valued at RM764.91 million.

AZRB said on Tuesday, its unit had received the letter of acceptance from Mass Rapid Transit Corporation Sdn Bhd for the Sungai Buloh-Kajang stretch and completion of viaduct guideway and other works from Plaza Phoenix to Bandar Tun Hussein Onn station.

“The date for practical completion for the works shall be June 30, 2016 and date for line completion for the whole of the works shall be July 31, 2017,” it said.

AZRB said the project was expected to contribute positively to the group’s earnings and the net tangible assets for the financial years ending 2012 to 2017.



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IWH launches takeover of Tebrau Teguh at 76c a share

KUALA LUMPUR: Iskandar Waterfront Holdings Sdn Bhd (IWH) is buying a 33.15% stake in TEBRAU TEGUH BHD [], comprising of 22 million shares, for 76 sen each from Kumpulan Prasarana Rakyat Johor Sdn Bhd’s (KPRJ).

Tebrau Teguh said on Tuesday, the proposed acquisition would trigger a mandatory take-over offer by IWH for the remaining shares.

“The mandatory offer will be conditional upon IWH receiving valid acceptances which would result in IWH and parties acting in concert with it holding in aggregate more than 50% of the voting shares in Tebrau Teguh,” it said.

The company said it had received a letter from KPRJ that it had accepted IWH’s offer to acquire the 33.15% stake. The disposal would reduce its stake from approximately 41.15% to 8.0%.

IWH has a paid-up of RM12.74 million comprising of 10 million shares of RM1 each and 274.629 million redeemable preference shares of 1.0 sen each.

IWH’s shareholders are Credence Resources Sdn Bhd and KPRJ and its directors are Datuk Lim Kang Hoo, Lim Hoe, Lim Keng Cheng, Lim Chen Herng, Datuk Dr Shahir Nasir, Datuk Ayub Mion and Johar Salim Yahaya.

Tebrau Teguh said that IWH, KPRJ and other relevant parties were to enter into definitive agreements on or before April 29, 2012.

Once the definitive agreements had become unconditional, the proposed acquisition would trigger a mandatory take-over offer by IWH and/or parties acting in concert with it for all the remaining Tebrau Teguh shares not already owned by IWH

“The mandatory offer will be conditional upon IWH receiving valid acceptances which would result in IWH and parties acting in concert with it holding in aggregate more than 50% of the voting Shares in Tebrau Teguh,” it said.



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Johor govt picks Tebrau Teguh to develop 413 acres in Pengarang

KUALA LUMPUR (Jan 31): The Johor government has appointed TEBRAU TEGUH BHD [] to develop 413 acres of land in Pengerang, Kota Tinggi, Johor for a comprehensive mixed development project.

The company said on Tuesday the land, belonging to the state government, was within the Johor oil & gas Industry hub.

The mixed development would complement Petroliam Nasional Bhd’s US$20 billion (RM60 billion) refinery and petrochemicals integrated development (Rapid).

“The company is currently negotiating the technical, financial and legal aspects of the appointment. We will make further announcement on the final terms and conditions of the said project later.

Tebrau Teguh said the project was expected to contribute positively to the future earnings and net tangible assets of the group.



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IJM Corp confirms letter of acceptance for RM974m MRT project

KUALA LUMPUR (Jan 31): IJM CORPORATION BHD [] confirmed that its unit had received the letter of acceptance from the Mass Rapid Transit Corporation Sdn Bhd for the Sungai Buloh-Kajang phase costing RM974.78 million.

IJM Corp said on Tuesday its unit IJM CONSTRUCTION [] Sdn Bhd had received the letter, dated Jan 31, for package V5 of the Mass Rapid Transit,

“The project involves the construction and completion of viaduct guideway and other associated works from Maluri portal to Plaza Phoenix station. The date of practical completion of the works is June 30, 2016,” it said.

IJM said the project would not have any significant effect on the earnings or net assets per share of the company for the financial year ending March 31, 2012, but is expected to contribute positively to the group’s future earnings.



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Southern Steel posts RM5.52m net loss in 2Q

KUALA LUMPUR (Jan 31): SOUTHERN STEEL BHD [] swung into the red with losses of RM5.52 million in the second quarter ended Dec 31, 2011 due to lower margins and foreign exchange translation losses.

It said on Tuesday that its revenue and loss before tax were RM928.84 million and RM6.40 million respectively as compared with the preceding quarter’s revenue and profit before taxation of RM734.0 million and RM17.3 million.

“The higher revenue in current quarter was mainly due to higher export volume and a loss was recorded as a result of lower margins,” it said. Loss per share was 1.3 sen. According to the notes to its accounts, there was a forex loss of RM5.46 million in the second quarter

Southern Steel said there were no comparative figures disclosed for the preceding year’s corresponding period following the change in financial year end from Dec 31, to June 30, during the preceding 18 months’ period ended June 30, 2011.

For the six-months period, it posted net profit of RM10.52 million on the back of revenue of RM1.66 billion.



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Malaysian AE Models 2Q net profit jumps 70% to RM3.34m

KUALA LUMPUR (Jan 30): MALAYSIAN AE MODELS HOLDINGS [] Bhd (MAEMode) net profit for the second quarter ended Nov 30, 2011 jumped 70% to RM3.34 million from RM1.97 million a year earlier, due mainly to higher revenue and better profit margins from logistics projects.

The company said on Tuesday that its revenue for the quarter rose 44.24% to RM165.46 million from RM114.71 million in 2010.

Earnings per share was 3.12 sen compared to 1.84 sen a year earlier, while net assets per share was RM2.21.

For the six months ended Nov 30, MAEMode’s net profit surged RM7.76 million from RM2.82 million in 2010, on the back of revenue RM317.09 million compared to RM224.33 million a year earlier.

On its outlook, the company said it was confident on the improvements of the global economy that may enhance its future profit moving forward.

“With the current order book and barring any unforeseen circumstances, the board is optimistic that the group will remain profitable for the remaining quarters of the financial year,” it said.



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Fibon 2Q earnings up 17.9% to RM1.29m on higher revenue

KUALA LUMPUR (Jan 30); Fibon Bhd net profit for the second quarter ended Nov 30, 2011 rose 17.9% to RM1.29 million, due mainly to higher revenue generated.

The company said on Tuesday that its revenue for the quarter surged 82.7% to RM5.49 million from RM3.01 million in 2010.

Earnings per share was 1.32 sen compared to 1.12 sen a year earlier, while net assets per share was 27 sen.

For the six months ended Nov 30, Fibon’s net profit fell 14.6% to RM2.23 million from RM2.6 million despite posting a 20.04% increase in revenue to RM9.13 million from RM7.07 million.

Reviewing its performance, Fibon said the higher revenue for the quarter was due to increase in both manufacturing and trading sales.

On its outlook, Fibon said despite facing various general economic challenges, the company was of the opinion that its performance for the financial year ending May 31, 2012 would not be severely affected.



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Market Commentary

The FBM KLCI index gained 7.74 points or 0.51% on Tuesday. The Finance Index increased 0.13% to 13442.67 points, the Properties Index dropped 0.03% to 1029.83 points and the Plantation Index rose 0.02% to 8729.42 points. The market traded within a range of 11.80 points between an intra-day high of 1521.29 and a low of 1509.49 during the session.

Actively traded stocks include COASTAL-CA, DRBHCOM-CG, COMPUGT, DRBHCOM-CI, AXIATA, DBE, DRBHCOM-CF, TMS-WA, MUDAJYA-CG and DRBHCOM. Trading volume decreased to 1782.81 mil shares worth RM2181.55 mil as compared to Monday’s 2307.55 mil shares worth RM1841.46 mil.

Leading Movers were GENTING (+22 sen to RM11.12), GENM (+16 sen to RM4.04), PETGAS (+48 sen to RM15.68), MAXIS (+15 sen to RM5.71) and SIME (+5 sen to RM9.14). Lagging Movers were AXIATA (-8 sen to RM4.67), HLBANK (-14 sen to RM11.36), TM (-2 sen to RM4.80), AIRASIA (-1 sen to RM3.55) and KLK (-2 sen to RM25.70). Market breadth was positive with 415 gainers as compared to 394 losers. -- JF Apex Securities Bhd



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IJM Corp to raise stake in KEuro?

KUALA LUMPUR: The potentially huge contracts spin-off from the RM7.07 billion West Coast Expressway (WCE) project has spearheaded IJM Corp Bhd into the spotlight. But not to be forgotten is Kumpulan Europlus Bhd (KEuro), which could see more corporate exercises.

“For a bigger exposure to the WCE concession, IJM Corp is likely to increase its stake in KEuro, which is now only 22.72%. It may not want to privatise KEuro, but certainly it may want to have bigger shareholdings in the company,” said a market observer.

He added that a bigger shareholding commitment from IJM Corp is also crucial for KEuro to raise the necessary funding for the equity portion of the project that is said to be about RM1.5 billion.

After a long wait of more than 15 years, KEuro’s 64.2%-owned subsidiary, West Coast Expressway Sdn Bhd, last week secured the approval in principle from the government for the privatisation of the construction of WCE under a built-operate-transfer model and for a concession tenure of 60 years. The highway stretches for 316km from Banting, Selangor to Taiping, Perak.

With WCE now in the bag and that KEuro also owns 50% of the 1,900-acre (760ha) Canal City development near Kota Kemuning in Shah Alam could be another reason why IJM Corp may be looking to increase its stake in KEuro. The Canal City project, which has a total gross development value of more than RM10 billion over 10 years, is slated to commence in August.

IJM Corp’s listed property arm IJM Land Bhd owns the remaining 50% of the Canal City project and is the lead project manager. The development could be lucrative given the land cost of merely RM5 per sq ft, according to management.

“KEuro will see more activities from 2012 onwards. With the commencement of WCE and Canal City developments, the stock may attract more interest,” said a market observer.

KEuro posted a net profit of only RM5.01 million for the nine months ended Oct 31, 2011 on revenue of RM14.81 million. The company lacked major business activities for the past few years, pending the government approval for the WCE project and the commencement of the Canal City development. KEuro’s total net borrowings amounted to RM146 million as at Oct 31, 2011.

Nonetheless, a bigger shareholding by IJM Corp in KEuro could mean a dilution in stake for KEuro president and chief executive Tan Sri Chan Ah Chye, whose family owns a 27.58% stake. The stake is now worth about RM190 million based on KEuro’s market capitalisation of RM688 million yesterday.

Closing at RM1.32 yesterday, KEuro’s share price has recovered from below 93 sen last August but still trades under its 52-week high of RM1.62 at the beginning of 2011. The stock is not covered by analysts.

IJM Corp’s involvement in KEuro began in 2005 when it acquired a 25% stake in KEuro (now diluted to a 22.72% stake following a shares placement exercise). The shares were purchased from several KEuro shareholders, including the KEuro group, Intelbest Corp Sdn Bhd, Pengurusan Bersistem Sdn Bhd, Ambang Sepakat Sdn Bhd and Chan.

The stake comprised 118.37 million shares and were purchased at 28 sen apiece for RM33.1 million. IJM Corp said at the time the purchase was influenced by its interest in KEuro’s concessions for both WCE and Canal City.

IJM Corp said it purposely did not buy out completely Chan’s stake in KEuro then, as the group saw KEuro president’s presence and his business connections too valuable to lose.

Since the purchase six years ago, IJM Corp has kept its holdings in KEuro intact. It did not even exercise an option to acquire another 5% stake that had lapsed within one year after the initial block, probably because of the uncertainty of KEuro securing WCE. But now that the government has given its approval for the highway concession, IJM Corp may now want to review its holdings in KEuro.

“The fact that IJM Corp bought its current 22.72% stake in KEuro cheap also means that it could afford to acquire more shares now and yet still keep its average cost at a reasonable level,” said a market observer.


This article appeared in The Edge Financial Daily, January 31, 2012.



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KLCI reverses earlier losses, closes up 7.7 points

KUALA LUMPUR (Jan 30): The FBM KLCI reversed its earlier losses and rose in the final minutes of trade on Tuesday in line with the higher closing at regional markets, lifted by gains including at Petronas-linked counters and Genting.

The FBM KLCI rose 7.74 points to close at 1,521.29. For the month, however, the index fell 9.44 points from its closing of 1,530.73 on Dec 30 last year.

Gainers overtook losers by 415 to 394, while 353 counters traded unchanged. Volume was 1.78 billion shares valued at RM2.18 billion.

At the regional markets, the Shanghai Composite Index edged up 0.33% to 2,292.61, Hong Kong’s Hang Seng Index rose 1.14% to 20,390.49, Japan’s Nikkei 225 was up 0.11% to 8,802.51, South Korea’s Kospi was up 0.79% to 1,955.79 and Taiwan’s Taiex added 1.48% to 7,517.08, while Singapore’s Straits Times Index rose 0.64% to 2,906.69.

Meanwhile, European shares rose on Tuesday on hopes Greece was nearing a debt swap deal needed to avoid a messy default, while European leaders agreed on stricter budget discipline measures to help prevent further debt accumulation in the region, according to Reuters.

On Bursa Malaysia, Petronas Gas rose 48 sen to RM15.68, Petronas Dagangan 30 sen to RM18, Glenealy 24 sen to RM7.37, FIma Corp and Coastal Contracts 23 sen each to RM6.45 and RM2.30, Genting 22 sen to RM11.12, BLD PLANTATION []s and GAB 20 sen each to RM8.59 and RM12.40, while Malayan Flour Mills added 19 sen to RM4.33.

Among the decliners, MPI fell 20 sen to RM3.48, Perstima down 18 sen to RM3.72, United Plantations 16 sen to RM20.34, Advanced Packaging and Hong Leong Bank 14 sen each to RM1.18 and RM11.36, Nestle, APM Automotive, Lafarge Malayan Cement and Uzma lost 10 sen each to RM55.70, RM4.50, RM6.68 and RM1.76 respectively, while Asia File lost nine sen to RM3.61.

The actives included Coastal Contracts, DRB-Hicom, Compugates, Axiata, DBE Gurney, TMS and Mudajaya.



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SC committee shot down general offer for E&O

KUALA LUMPUR: The Securities Commission’s (SC) task force and its senior management recommended that Sime Darby Bhd trigger the mandatory offer obligation for the remaining shares in Eastern & Oriental Bhd (E&O). However, this recommendation was not agreed upon by the takeovers and mergers committee.

This was revealed in the affidavit filed by SC member Datuk Francis Tan Leh Kiah in opposing the judicial review filed by Michael Chow Keat Thye, a minority shareholder of E&O.

The task force recommended that a new party acting in concert be formed between Sime Darby’s wholly-owned Sime Darby Nominees Sdn Bhd (SDN) and Datuk Terry Tham. Both collectively held more than 33% of the voting shares in E&O.

However, this recommendation was not agreed upon by the takeovers and mergers committee. Via a majority decision, the committee decided that SDN and Tham were not persons acting in concert and hence no new concert party was formed that could trigger a mandatory offer.

The takeovers and mergers committee comprises SC chairman Tan Sri Zarinah Anwar, SME Bank chairman Datuk Gumuri Hussain, finance ministry’s deputy secretary-general treasury (policy) Datuk Dr Mohd Irwan Serigar Abdullah, former Inland Revenue Board director-general/CEO Tan Sri Hasmah Abullah and Tan, who is a consultant at Azman, Davidson & Co, Advocates & Solicitors.

The affidavit said Zarinah had recused herself from the onset of the inquiry as her husband Datuk Azizan Abdul Rahman is the chairman of E&O, while Irwan did not attend the meeting on Oct 10, 2011.

Tan said he and Gumuri acted as co-chairmen. The only other member who attended the meeting held from 4pm to 6.45 pm was Hasmah.

The task force also recommended that the three vendors Tham, Tan Sri Wan Azmi Wan Hamzah and GK Goh Holdings Ltd were not persons acting in concert, and collectively did not have control of E&O that could be passed to SDN in pursuant to SDN’s acquisition.

This recommendation was unanimously agreed by the takeovers and mergers committee.

Two issues were considered by the task force. First if SDN’s acquisition of the 30% stake in E&O was an acquisition from a controlling vendor of part of voting shares, and second whether a new group of persons acting in concert was formed between SDN and Tham upon the acquisition.

The SC also applied to the court for Justice Tuan Abang Iskandar Abang Hashim to recuse himself as the sitting judge as he was seconded to the SC enforcement division during his tenure in the Attorney-General’s Chambers.

After serving in the SC on secondment for two years, Abang Iskandar had opted for retirement and joined the commission on a full-time basis in 2006 where he held the position of executive director of the enforcement division.

The SC said Abang Iskandar is a senior management of the commission and is familiar with the internal workings and individuals who sit at the investigative committee level.

“In the circumstances, there is a real danger of bias prevalent in so far as the present dispute is concerned,” said the SC in its application.

To recap, Chow filed for judicial review against the SC last December after the regulator decided not to compel Sime Darby to make a general offer for all remaining shares in E&O. He is seeking a court order to compel the SC to revoke the waiver of a general offer.

This came after Sime Darby’s contentious purchase of a 30% stake in E&O from its major shareholders — E&O managing director Tham, Wan Azmi and GK Goh Holdings.

The deal sparked a debate whether Sime Darby could be deemed to be acting in concert with the three vendors, a claim which Sime Darby and the three E&O shareholders denied.

After investigating the matter, the SC ruled in October last year that the plantations-based conglomerate’s acquisition of the 30% stake did not trigger a mandatory offer obligation for E&O.

The SC also found no collusion between Sime Darby and Tham with regard to the deal, where Sime Darby paid RM766 million for the 30% block.

At RM766 million, the deal valued E&O at RM3.20 per piece or a 59% premium to E&O’s share price when the deal was announced on Sept 9 last year.


This article appeared in The Edge Financial Daily, January 31, 2012.



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Public Bank achieves record profit of RM3.5b for FY11

KUALA LUMPUR: Public Bank Bhd’s net profit for FY11 ended Dec 31 rose 14.3% to a record RM3.48 billion from RM3.05 billion previously.

The company said the improved earnings were due to higher net interest and net income from its Islamic banking business, which grew 8.6% y-o-y or RM464.6 million. Its earnings were also boosted by its higher net fee and commission income, which grew 8.4% or RM87.1 million.

“The Public Bank group’s sound financial results for 2011 are a validation of the group’s effective organic growth strategies and sustainable business model. We have benefited from our disciplined execution of our growth strategies while preserving prudent risk management practices to ensure sustainable and stable returns,” said chairman Tan Sri Teh Hong Piow in a press statement.

Public Bank announced a second interim single-tier dividend of 28 sen per share, bringing the total dividends paid in FY11 to 48 sen. It paid its first interim dividend of 20 sen in August last year. This brings its total payout for the full year to RM1.68 billion, or 48% of its total net profit, its lowest dividend payout ratio in recent years.

Public Bank’s dividend payout ratio has dropped since FY08, owing to concerns about Basel requirements, falling to 53.2% that year from 87.4% in FY07.



The bank’s capital position, measured by its Tier 1 capital ratio, stood at 10% at end-2011, while its risk-weighted capital ratio improved to 15.3%. Revenue for the full year grew 15.6% to RM12.76 billion from RM11.04 billion in 2010.

“In addition to the growth of income from various sources, impairment allowance on loans showed a drop of 9.9%, or RM65.5 million, despite the 1.5% collective impairment allowance set aside for strong loan growth. These were partially offset by higher operating expenses, which rose 5.2% or RM108.4 million mainly due to an increase in personnel costs resulting from higher business volume,” the company said in a statement to Bursa Malaysia yesterday.

Public Bank said it remained the country’s most cost-efficient bank as its cost-to-income ratio was below 30% compared with the banking industry’s average of 46.7%. Its gross impaired loan ratio improved to 0.9%.

The bank saw its total customer deposits rise 13.3% to reach RM200.4 billion at end-2011, while gross loans grew 13.5% to RM177.7 billion. For 4QFY11 ended Dec 31, net profit rose 3.6% to RM876.9 million from RM846.2 million previously, while revenue rose 11.1% to RM3.3 billion from RM2.97 billion.

OSK Research said in a report yesterday that Public Bank’s 4QFY11 results were in line with estimates although it signalled a moderation in growth.

“The contraction in net interest margin, slowdown in loans momentum and negative impact of weak capital market sentiment on new unit trust sales and brokerage income were the key drags on the company’s growth momentum in 4Q,” said the research house, which maintained its “neutral” recommendation on the stock and left its target price unchanged at RM14.

“Despite the stock’s superior asset quality and resilience in weathering economic downturns, we think the market has largely priced these into its premium valuations,” OSK said.

The counter closed at a 52-week high of RM13.56 yesterday, as trading volume rose to 4.59 million shares from 12.4 million shares last Friday.


This article appeared in The Edge Financial Daily, January 31, 2012.



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China Stationery optimistic on local listing

KUALA LUMPUR: China Stationery Ltd (CSL), the integrated plastic stationery maker which will soon debut on Bursa Malaysia, says it has no worries about the lacklustre performance of other China-based companies listed on the local bourse.

CSL, based in Futian in Fujian province, will launch its prospectus today. The company is valued at about RM1.2 billion for its initial public offering (IPO), potentially making it the most valuable China-based company on the bourse if its share price does not fall after listing.

Xingquan International Sports Holdings Ltd is the largest so far with a market capitalisation of RM275.06 million as at yesterday.

During a media interview yesterday, CSL chairman Chan Fung said, “We have 20 years of experience in the stationery industry. We are confident that we can do our best to maintain and increase the share price [upon listing].”

The seven China-based companies in Malaysia, five of which are shoe manufacturers, have suffered from a negative perception among investors. Their stock prices have experienced sharp declines since their listings. Although most have registered double digit earnings growth and offered good dividends, many are trading below their book values and even net cash per share.

CSL is involved in designing, manufacturing and the sale of more than 450 plastic filing and document storage products under its own brands. It has the largest market share for stationery files in China, according to its management.

Chan (centre), financial controller Ang Chun (right) and director Tan Choon Hwa with some of the company's products at yesterday's media briefing.

In order to entice investors, Chan said CSL has set a dividend policy of not less than 20% of its net profit from FY11 ended December onwards.

Note that in FY10, the company registered a profit after tax of 397.63 million yuan (RM192.54 million) on the back of 1.41 billion yuan in revenue. For the seven months to July 31, 2011, it recorded profit after tax of 228.39 million yuan on revenue of 972.72 million yuan.

Chan said CSL’s house brand products are marketed in China and in over 45 countries. As at July 2011, it had 300 distributors worldwide, of which 14 are exclusive distributors.

In FY10, Asia (excluding China) contributed the largest share of revenue to CSL at 33%, followed by China (28%), Americas (16%), Europe (16%) and other countries (7%).

From 2008 to 2010, CSL’s three year compound annual growth rate (CAGR) for revenue was 17.98%, and it has sustained a gross profit margin of more than 45% since FY08.

Chan is confident the company will continue to post handsome growth, saying the global plastic stationery industry is expected to expand at a CAGR of 5.3% from 2010 to 2014, according to Frost & Sullivan. Chan said the company has not been affected by the eurozone debt crisis, and has actually received strong interest from new customers from the region.

CSL is planning to set up a manufacturing plant in Malaysia and the products made here will be for the Asean and Middle East markets. Its existing manufacturing plant is located in Fujian province in China.

Post-listing, Chan said the company’s plans include expanding its sales network, investing in more research and development (R&D) to design more innovative and high margin products, and increasing its production capacity.

According to Chan, he and two other individuals will hold about 74.7% of CSL post listing. The other single largest investor is Lembaga Tabung Haji which will have a post-IPO stake of 2.23%.

On why the company has chosen to list on Bursa, Chan explained that CSL was actually approved to list on the Singapore Exchange in 2008 but withdrew because market conditions were bad during the global financial crisis. Subsequently, Bursa began promoting foreign listings in Malaysia and with Lembaga Tabung Haji investing in CSL in July 2009, the company then decided to list in Malaysia.

CSL will issue 90 million new shares, of which 60 million will be made available to the public via balloting. The remaining 30 million shares are earmarked for private placement.

CSL is expecting to raise RM85.5 million from the IPO. The bulk of the proceeds will be utilised for the purchase of new machinery and equipment as well as for R&D.

Chan said CSL will have an annualised price-earnings ratio of around six times based on its offer price, which will be announced in its prospectus today.

CSL’s adviser, underwriter and placement agent is M&A Sdn Bhd, while its auditor is Grant Thornton.


This article appeared in The Edge Financial Daily, January 31, 2012.



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Falling European sales send MPI into the red

KUALA LUMPUR: Malaysian Pacific Industries Bhd (MPI) reported a 24.1% fall in revenue to RM279.2 million for 2QFY12 ended Dec 31 from RM367.6 million in the previous corresponding quarter, mainly due to poor performance in Europe. As a result, MPI saw a net loss of RM16.2 million or 8.37 sen a share for 2QFY12, compared with a net profit of RM25.29 million in 2QFY11.

By segment, its revenue fell 35%, 22% and 13% in Europe, Asia and the US respectively from the previous corresponding quarter. “European billings reduced significantly during the period under review. This shifted the revenue mix for Europe from 31% in 2QFY11 to 27% for the quarter under review,” said MPI.

For the six months ended Dec 31, 2011, MPI’s revenue came to RM594.8 million, an 18.92% drop from RM738 million in the previous corresponding period. It made a loss of RM25.84 million from a profit of RM51.13 million previously.

MPI closed 10 sen higher at RM3.68 yesterday, with 792,900 shares traded. The counter has been on the rise since the Chinese New Year break, rising 40 sen or 12.2% from RM3.28 on Jan 20.


This article appeared in The Edge Financial Daily, January 31, 2012.



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Karyon clarifies listing issue of subsidiary

KUALA LUMPUR: Karyon Industries Bhd has clarified that its subsidiary, Karyon (Jinhua) Advanced Materials Co Ltd, has no intention of seeking a listing on the Hong Kong Stock Exchange (HKSE), as reported by a local newspaper last Friday.

In a filing with Bursa Malaysia yesterday, Karyon said it would make the necessary announcement should there be any material information that falls under the scope of the ACE Market Listing Requirements of Bursa.


This article appeared in The Edge Financial Daily, January 31, 2012.



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Glenealy, Lingui rally on privatisation plans

KUALA LUMPUR: Investors chased shares of Glenealy Plantations (Malaya) Bhd and Lingui Developments Bhd yesterday following last Friday’s announcement by both companies that they had received takeover offers from parent company Samling Strategic Corp Sdn Bhd.

Glenealy, which operates oil palm plantations in Malaysia and Indonesia, saw its shares rise as much as 66 sen or 10% yesterday to RM7.21, its highest in 14 years, since October 1997, before ending at RM7.13 for a market value of RM822.53 million. The stock, which had some 149,700 shares traded yesterday, had gained 18% this year, surpassing the FBM KLCI’s 1% decline.

Shares in Lingui, a wood products manufacturer, gained up to 20 sen or 15% to RM1.56 before closing at RM1.52 for a market capitalisation of RM1 billion. The stock, which saw 2.56 million shares exchange hands yesterday, had also gained 18% this year.

Trading in both stocks resumed yesterday after a suspension between Jan 20 and Jan 27. Prior to the suspension, Glenealy and Lingui were last traded at RM6.55 and RM1.36 respectively.

Samling Strategic, a wholly owned private entity of Tan Sri Yaw Teck Seng and his family, is offering to buy the remaining shares in Glenealy at an indicative price of RM7.50 each and the remaining stake in Lingui at RM1.63 per share.





Samling Strategic already owns 53.69% in Glenealy and 67.2% in Lingui. The takeover offer for both companies is in conjunction with the parent firm’s intention to privatise its 54% Hong Kong-listed subsidiary Samling Global Ltd, a wood products entity, at HK$0.76 a share. Samling Global owns 67.2% of Lingui, which in turn is a major shareholder of Glenealy.

Trading in Samling Global shares, which was suspended since Jan 20 at HK$0.375 prior to the privatisation announcement, resumed at 1.30 pm yesterday. The stock surged 87% to close at HK$0.70 for a market worth of HK$3.01 billion. The stock had gained 84% this year compared to the Hang Seng Index’s 9% gain.

In a note yesterday, OSK Research said the offer price for Glenealy, which translates into an enterprise value (EV) per planted hectare of US$8,400 (RM25,536), undervalues the plantation firm.

“We believe the offer undervalues Glenealy and opens up the possibility of an outside party making a competing bid. Given this view, we advise shareholders to hold out for a higher offer price and maintain our fair value at RM8.23, based on 12 times CY12 price-earnings ratio (PER),” said the research firm.

OSK added that should Glenealy’s assets be valued at an EV per ha of US$12,000, being a recent transacted valuation for plantation land in Indonesia, Glenealy shares would be valued at RM10.26, a premium of 37% over the RM7.50 offer price.

RHB Research, however, deemed the offer prices for Lingui and Glenealy as fair. At RM1.63 for Lingui, the offer price values the firm’s timber business at a forward PER of about 10 times which is higher than the fair valuation of eight times for the timber sector, it said.

The RM7.50 offer price for Glenealy values the company at a forward PER of 12.8 times, which is near RHB’s target of 13 times for mid-sized plantation firms.

According to RHB Research, it should not be difficult for Samling Strategic to secure financing for the takeover exercise as it will have access to a cash pile of RM560 million upon the privatisation of Samling Global, Lingui and Glenealy. It also notes that the companies to be privatised have strong operating cash flow and minimal capital expenditure commitments.

RHB has upgraded its recommendation for Lingui from “underperform” to “neutral” and raised the fair value for the stock from RM1.33 to RM1.63.

Glenealy’s financials have improved significantly. Net profit more than doubled to RM19.02 million in the first quarter ended Sept 30, 2011 from RM7.41 million a year earlier. Revenue was up 68% to RM71.68 million from RM42.61 million. Debt free Glenealy had a cash pile of RM173.47 million as at Sept 30 last year. Its latest reported net assets per share stood at RM5.28.

Lingui, however, sank into a net loss of RM28.07 million in the first quarter ended Sept 30, 2011 againts a net profit of RM39.01 million a year earlier despite revenue adding 20% to RM435.01 million from RM365.06 million.

The net loss was mainly due to accounting losses in the fair value of its biological assets, apart from higher operating and finance expenses, according to notes accompanying its latest financials.

Lingui had cash of RM83.59 million against debts of RM621.12 million, translating into a net debt of RM537.53 million. Its latest reported net assets stood at RM2.47 per share.


This article appeared in The Edge Financial Daily, January 31, 2012.



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AirAsia flew 30 million passengers in 2011

KUALA LUMPUR: AirAsia Bhd flew 29.86 million passengers in 2011, up 16.27% from 25.68 million the previous year.

The low-cost carrier carried 7.93 million passengers, a 12.3% increase, in 4QFY11 ended Dec 31 2011, compared with 7.06 million in the previous corresponding quarter in 2010.

AirAsia released its preliminary operating statistics yesterday. It said it carried 4.85 million passengers from Malaysia (2010: 4.44 million), 1.82 million from Thailand (2010: 1.62 million) and 1.25 million from Indonesia (2010: 1 million).

Its capacity also rose 13.5% to 37.5 million from 33 million while load factor increased to 80%, up 2%.

The airline said its available seat kilometres (ASK) was up 13.5% to 43,940 million from 38,704 million, while its revenue passenger kilometres (RPK) surged 18.5% to 35,091 million, from 29,613 million in the same period of 2010.

An analyst covering the airline sector reckons that the current uncertainty around the economy is unlikely to affect the budget airline’s passenger load as AirAsia has an “Asean-centric network”.

“They won’t have it as bad as the full-service carriers that have longer routes, especially to Europe. I think the Malaysian side will see increased frequency in high yield routes while there is a likelihood of new routes,” he said.

Reuters reported yesterday that Southeast Asian carriers are expected to cash in on the increasing interest from both business and leisure travellers in Myanmar, which in recent months has announced some democratic reforms.

According to the news agency Thai AirAsia is looking to add new routes into Myanmar’s inland cultural centres. Presently, AirAsia flies to Yangon from Bangkok and Kuala Lumpur.

“We are considering opening more flights and destinations in Myanmar. We’re only operating to Yangon at the moment, but we’re looking at Mandalay and Bagan,” Thai AirAsia CEO Tassapon Bijleveld was reported as saying.


This article appeared in The Edge Financial Daily, January 31, 2012.



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Tebrau Teguh suspended ahead of Danga Bay acquisition

KUALA LUMPUR: Tebrau Teguh Bhd yesterday had its shares suspended from trading ahead of the announcement of a material corporate transaction to be made by its major shareholder, Kumpulan Prasarana Rakyat Johor (KPRJ).

The suspension follows a report by The Edge weekly on Jan 30. The report, quoting sources, said Danga Bay Sdn Bhd (DBSB), the master developer of the Danga Bay waterfront project in Johor, is to be injected into Tebrau Teguh, a property development company linked to the Johor government.

“Tebrau Teguh will have a seamless strip of seafront land facing Singapore once the exercise is completed. The majority owner of DBSB, Datuk Lim Kang Hoo, will drive the development,” said a source quoted by the report.

It is believed that DBSB will be acquired by Tebrau Teguh from its current owners, Credence Resources Sdn Bhd and KPRJ. Lim owns 70% of DBSB via Credence Resources while KPRJ owns the rest. The transaction is said to be satisfied via the issuance of new shares in Tebrau Teguh to Lim.

The source which is close to the matter had revealed, “KPRJ will still be the largest shareholder in Tebrau Teguh and Lim the second largest. KPRJ will have the Danga Bay project as its jewel.”

Spanning 730ha, Danga Bay is an integrated waterfront development project mooted in 1997. Its master plan was unveiled to the Johor government in 2001 by DBSB, which was set to oversee and carry out the development of Danga Bay.

If the deal goes through, Tebrau Teguh will become a serious contender in the development of Iskandar Malaysia.

Tebrau Teguh, which closed at 75 sen before suspension, will resume trading tomorrow.


This article appeared in The Edge Financial Daily, January 31, 2012.



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Flood-induced higher margins may not be sustainable

KUALA LUMPUR: Some hard disk drive (HDD) component makers are receiving a boost after last year’s Thailand floods disrupted the HDD supply chain and resulted in a rise in the prices caused by a drop in production volume.

Certain players, notably JCY International Bhd, stand to benefit from a strong growth spurt in profitability in the near term, say industry observers. However, they reckon that this earnings boost may not last long.

Some industry players believe structural issues continue to plague the HDD industry. Against the backdrop of slowing demand and thin margins as a result of competition from solid state drives (SSD), plus an industry oversupply, the long-term prospects for the HDD industry have not improved much.

Investing interest in Dufu Technology Corp Bhd, Eng Teknologi Holdings Bhd (EngTek) and Notion VTec Bhd has increased, thanks to JCY’s recent announcement that it is likely to see an increase of 1,900% in profits for 1Q2012.

JCY cited higher selling prices as a result of the floods that have caused a supply shortage and the US dollar’s appreciation versus the ringgit. In addition, effective product mix and better cost management helped enhance its earnings.




“We and others in the industry saw an increase in average selling prices (ASP) of about 10% to 20% after the [Thai] floods,” its finance director James Wong told The Edge Financial Daily recently.

While JCY’s profit forecast raises hopes and stock prices of HDD-related companies, analysts warn that it may not hold true for all HDD component manufacturers.

They caution on the sustainability of high margins and profits when the supply chain shortages are rectified.

According to industry observers, JCY was able to capitalise well on the supply chain disruption as it saw increased demand for two of its products — base plates and actuators. These two are the larger parts in an HDD.

Production of these parts was severely disrupted because most of the manufacturers making such parts were located in Thailand, and they were inundated by floodwaters.

This turned out to be a blessing for JCY, whose production plants were not affected by the flood. Thus, JCY, which supplies mainly to Seagate Technology and Western Digital Corp, was able to secure contracts for these components at relatively high prices.

However, companies like Dufu, which produces smaller HDD components, benefited less as these parts saw a smaller increase in prices.

“For smaller parts such as pins, clamps and spacers, production is spread across Malaysia and Singapore. As being smaller, they are cheaper to ship to factories in Thailand,” said an analyst.

“The supply of these parts was not disrupted, unlike bigger parts like base plates and actuators, which are produced in Thailand to lower transport costs.”

While higher prices amid volume compression can only compensate for bigger margins for so long, the higher demand for SDD is seen as a threat to the longer term prospects of HDDs.

With HDD prices now sharply higher due to the shortage problems, it could exacerbate the problem as the price gap narrows between the two memory devices.

OSK Research said Western Digital and Seagate had used this opportunity to raise prices of their HDD products by 50% to 100%, while cutting down warranty periods.

Wong: We and others in the industry saw an increase in average selling prices of about 10% to 20% after the floods.

“We believe demand for HDDs could be hampered in the longer term by demand for alternative storage mechanisms, such as cloud computing and hybrid storage,” RHB Research said in a research note on the outlook for semiconductors.

Furthermore, according to MIDF Research’s Byte IT report, the development of cloud computing will result in mobile devices lighter than current smartphones or tablets, and these would be able to access large amounts of Internet data at any given time or place.

“Once cloud computing technology matures, tablets will replace personal computers as the main device for greater corporate productivity,” the report said, implying that the need for HDDs will decline as more SSD-based gadgets emerge in the market.

In the meantime, analysts are awaiting the release of the 4Q2011 results of the local HDD component players, due by end-February, to gauge the financial impact of the floods.

It will be interesting to see if the effects of higher margins due to parts shortages can outweigh the impact of lower volume sales.


This article appeared in The Edge Financial Daily, January 31, 2012.



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Putting the clamps on auto loans?

Automotive sector
Maintain neutral: Although we do not expect the rumoured tightening of auto loan guidelines to put a significant dent in vehicle sales, it reaffirms our belief that the lending environment will tighten, which poses downside risks to vehicle sales.

The impact of these proposals on the auto companies under our coverage is unlikely to be significant. We stay “neutral” on the sector. We like DRB-Hicom Bhd for exposure to the auto sector. UMW Holdings Bhd is attractive from a dividend yield standpoint.

According to The Edge Financial Daily, buyers of luxury cars such as Bentley, Ferrari and Maserati may be required to fork out as much in 50% upfront payment. In addition, car buyers may be limited to a maximum of two car loans in their name at any one time. Another proposal is the standardisation of lending rates against specific models. “The banks will stop lending to people who want to take third car loans in their name as it is found that borrowers with more than two car loans pose the highest risk of non-performing loans [NPL]. Buyers taking first car loans will still be able to secure 90% financing but for a second loan a down payment of 30% to 35% is required, depending on the creditworthiness of the borrower,” said the source.



The proposal to tighten car loans is not entirely a surprise given the current economic environment and the need for banks to rein in NPL. These proposals are negative, but based on our channel checks, their impact on total vehicle sales is unlikely to be significant for the following reasons: (i) luxury cars make up less than 3% of total vehicle sales; (ii) buyers of luxury cars generally do not require much financing; and (iii) it is uncommon for individuals to own more than two cars since cars are depreciating assets. As such, we are maintaining our projection of 5% growth in total vehicle sales to 628,022 units for 2012.

Stay on the sidelines. We see few reasons to be excited about the sector now. — CIMB Research, Jan 30


This article appeared in The Edge Financial Daily, January 31, 2012.



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Axiata sees good signs from XL

Axiata Group Bhd (Jan 30, RM4.75)
Maintain buy at RM4.77 with target price of RM5.85: Axiata’s Indonesian subsidiary, Axiata XL released its FY11 earnings last Friday. Its earnings of 2.83 trillion rupiah (RM960 million) came marginally below our expectation at 96.1% of our full-year estimates as we underestimated net finance expenses.

For FY11, XL posted revenue of 18.712 trillion rupiah, which was within our expectations, growing by 7.2% year-on-year (y-o-y). The revenue growth was underpinned by strong growth in data revenue. The combined revenue of SMS data and value added services (VAS) grew by +26.5%y-o-y to 7.346 trillion rupiah. In contrast, voice revenue declined by 7% y-o-y to 7.864 trillion rupiah. In terms of non discounted revenue contribution, voice revenue contributed 41.6% while SMS and data contributed 21.5% and 17.3%, up from 19.7% and 13.2% in FY10.

Earnings before interest, tax, depreciation and amortisation (Ebitda) grew marginally by 0.7% y-o-y to 9.35 trillion rupiah in FY11 and Ebitda margin (net revenue after discount) was maintained at circa 50% despite the impact of severance payment provision for the network managed services solution.

We like the fact that XL also posted strong growth in subscriber base, data traffic and minutes of usage (MOU). Subscriber base continued its double digit growth, growing by 14.9% y-o-y to 46.4 million. The highest growth was recorded in the pre-paid segment, which grew by 15% to 46.1 million. MOU expanded by 12.9% y-o-y despite a higher number of subs, which we believe contributed to revenue growth. Data traffic growth was tremendous, growing by 295% y-o-y to 10.6 petabyte. Hence, we are not surprised that data continues to be a focus in Indonesia. We believe the data market in Indonesia will continue to gather pace as the smartphone penetration rate increases.

We believe XL’s good performance suggests that Axiata will post similar strong FY11 results. XL contributed 39% to Axiata’s 9MFY11 revenue and 46% to Ebitda. For FY11, we are expecting Axiata’s earnings and revenue to hit RM2.83 billion and RM16.4 billion respectively. We are maintaining our FY11 and FY12 forecast for Axiata pending release of its FY11 results. We continue to like Axiata due to its growth potential and stable Ebitda despite operating in very competitive markets. We maintain our “buy” recommendation for Axiata. — MIDF Research, Jan 30


This article appeared in The Edge Financial Daily, January 31, 2012.



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A long dry season ahead for dry bulk shipping

Dry bulk shipping
Maintain underweight: We maintain our “underweight” sector call. Our top pick is Pacific Basin Shipping Ltd (Hong Kong) on its extremely cheap valuations. Our top “sell” is STX Pan Ocean Co (STXPO, South Korea) as it is expected to be unprofitable. We have cut earnings per share by up to 40%, though we raise forecasts for Precious Shipping Pcl (Thailand). Malaysian Bulk Carriers Bhd has been downgraded from “neutral” to “underperform”.

Bulk demand growth is expected to slow down from 4.5% in 2011 to 3.9% in 2012 as China’s iron ore imports decline. For the first time in a decade, property starts in China are expected to decline due to the tightening measures imposed by the government in 2011 and investors’ pessimism on the property sector. China’s steel production has been declining since mid-2011, while iron ore stockpiles are at a peak. Away from China, world economic growth is expected to slow, which is likely to result in lower demand for bulk commodities.

There will be another round of record vessel deliveries in 2012, leading to an average fleet growth of 13.2% which will worsen the oversupply situation. The current order book still stands at a substantial one-third of global fleet despite last year’s record newbuild deliveries. We do not expect a huge volume of demolitions given the relatively young fleet. The growing global supply of ships will keep demand for bunker fuel high. High bunker costs will eat into bulk companies’ profits.



The demand-supply imbalance is set to last at least until 2013. Even a recovery in 2014 is uncertain if global growth continues to stagnate. For 2012, supply growth is projected to outweigh demand growth by nearly three times. Our revised Baltic Dry Index forecasts are 1,228 points for 2012 (-20.8% y-o-y), 1,099 (-10.5%) for 2013 and 1,154 (+5%) for 2014. — CIMB Research, Jan 30


This article appeared in The Edge Financial Daily, January 31, 2012.



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Utilities: Revealing the bidders for new plant-ups

Utilities sector
Maintain neutral: The Energy Commission has unveiled a list of 47 prospective bidders, comprising local and foreign firms, for the development of new combined-cycle power plants in the country. This follows the commission’s recent issuance of “notice for expression of interest” for a total plant-up of 4,500MW of new generation capacity in Peninsular Malaysia.

Among the local parties bidding for the combined-cycle power projects are Tenaga Nasional Bhd (TNB), Tanjong Energy Holdings Sdn Bhd, YTL Power International Bhd (YTLP), Petroliam Nasional Bhd (Petronas), Sime Darby Energy Sdn Bhd, Malakoff Corp Bhd and Ranhill Power Sdn Bhd. The foreign parties include Samsung C&T Corp, Marubeni Corp, Siemens Project Ventures, Mitsubishi Corp, Mitsui & Co, Daewoo International Corp and Korea Electric Power Corp. In line with the government’s policy, foreign participation in a consortium is capped at 49%.

The next stage is for a pre-qualification of interested parties — with the pre-q document to be issued by early February this year. We are positive on the level of transparency attempted by the regulator to provide a level playing field and award contracts to the least-cost unit generator. From a recent meeting with the regulator, we understand that the first phase of plant-up (from a total of 4,500MW of generation capacity) will include two times 700MW gas-fired power plants slated for commercial operation by 2016/17. Importantly, the two times 700MW power plant to be awarded by the Energy Commission will be located at a brownfield site already identified by the regulators. We believe the potential sites are Prai in Penang, Pasir Gudang in Johor and Klang, Selangor. All these sites are currently owned by TNB with existing gas-fired power plants in operation (YTLP currently operates in Pasir Gudang). We also understand that while TNB is an interested bidder in the 4,500MW plant-up exercise, in the event it does not emerge as the least-cost producer, a land lease agreement will be extended to the winner of the new power plant.



All in, we see opportunities for the likes of YTLP, TNB, Tanjong plc (unlisted) and Malakoff (51%-owned by MMC Corp Bhd) to increase their existing generation capacity. Due to the nature of the competitive bidding currently undertaken by the Energy Commission, project internal rates of return will likely be at a level similar to overseas projects (low teens) and therefore, the incremental impact on net asset values will be far less than past projects, albeit being positive.

Maintain “neutral” on the sector. The sector as a whole trades at 16.1 times CY12 earnings — above market valuations. This, we believe, fairly reflects the sector’s liquidity and large market capitalisation representation. For yield exposure, we like YTLP. TNB (“reduce”, target price: RM6.12) may see choppy days ahead (until after the general election) in the absence of outright fuel volume and price commitment from the regulator. — Affin IB Research, Jan 30


This article appeared in The Edge Financial Daily, January 31, 2012.



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KLCI slips below 1,515-level at mid-day, select blue chips weigh

KUALA LUMPUR (Jan 31): The FBM KLCI slipped to below the 1,515-point level at the mid-day break on Tuesday, weighed by losses at select blue chips including Tenaga and PLANTATION []-related stocks.

The FBM KLCI fell 2.24 points to 1,511.31 at the mid-day break. Market breadth turned negative with losers leading gainers by 418 to 263, while 329 counters traded unchanged. Volume was 829.67 million shares valued at RM768.79 million.

The ringgit strengthened 0.43% to 3.0468 versus the US dollar; crude palm oil futures for the third month delivery fell RM19 per tonne to RM3,063, crude oil added 58 cents to US$99.36 while gold rose US$5.10 an ounce to US$1,735.18.

Meanwhile, Asian shares and the euro recovered earlier losses on Tuesday after Greek Prime Minister Lucas Papademos raised hopes for a deal to be reached this week to avoid a default, but markets were starting to worry that Portugal might need a second rescue, according to Reuters.

Japan’s Nikkei 225 added 0.40% to 8,827.91, Hong Kong’s Hang Seng Index was up 0.71% to 20,304.40, the Shanghai Composite Index gained 0.19% to 2,289.43, Taiwan’s Taiex added 0.24% to 7,425.48, South Korea’s Kospi was up 0.46% to 1,949.42, but Singapore’s Straits Times Index shed 0.40% to 2,876.84.

On Bursa Malaysia, BAT fell 54 sen to RM48.84, Hong Leong Bank 18 sen to RM11.32, MPI 17 sen to RM3.51, Asia File and Advanced Packaging 14 sen each to RM3.56 and RM1.18, JT International and Perstima 12 sen each to RM6.83 and RM3.78, Lafarge Malayan Cement 11 sen to RM6.67, Tenaga 10 sen to RM5.87 and Ta Ann nine sen to RM5.67.

Among plantation-related stocks, KLK fell six sen to RM25.66, while IOI Corp and Batu Kawan shed four sen each to RM5.36 and RM19.20.

Gainers included Glenealy, Malayan Flour Mills, Fima Corp, GAB, Coastal Contracts, Maxis, Mudajaya, Triplc, BLD Plantations and Shell, while the actives included DRB-Hicom, DBE Gurney, Axiata, TMS and DGSB.



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Tenaga slips on uncertainties over further compensation

KUALA LUMPUR (Jan 31): Shares of TENAGA NASIONAL BHD [] (TNB) fell on Tuesday on rising concerns about further compensation for the power giant which is still facing a severe gas shortage.

At 12.05pm, TNB was down 10 sen to RM5.87. There 1.07 million shares done at prices ranging from RM5.87 to RM5.97.

News reports said the problem of compensation for the burning of distillates following the severe gas shortage at TNB had not been resolved yet. This was despite the three major stakeholders - TNB, Petroliam Nasional Bhd and the government - have agreed to share the RM3 billion incurred between January 2010 and October 2011.

The reports said there was no plan yet on how to absorb the additional cost of burning distillates after that period. This would mean TNB had to continue burning distillates, which cost five times more than gas, from November 2011 until August 2012 when the regassification plant is ready in Malacca.



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Axiata slips to October lows on regulatory approvals concerns

KUALA LUMPUR (Jan 31): Shares of Axiata Group Bhd fell to the lowest since Oct 4, 2011 on concerns about regulatory approvals for its outdoor structures and regional risks.

At 11.42am, it was down 8.0 sen to RM4.67. There were 13.06 million shares done at prices ranging from RM4.65 to RM4.76.

On Monday, Axiata said it received another two-year extension from the Securities Commission (SC) to get the local authorities’ approval for its outdoor structures.

The SC gave it until Jan 29, 2014 to get the approvals for the outdoor structures, which were part of the conditions for its listing on Bursa Malaysia.

To recap, on Feb 22, 2010, the SC had given Axiata two years up to Jan 29, 2012.

As at Dec 19, 2011, Axiata said 22 outdoor structures were pending approval from local authorities.

It also said applications for 27 outdoor structures were declined and the Celcom Group was appealing to the relevant local authorities.

Meanwhile, RHB Research Institute maintained its Market Perform call with unchanged sum-of-parts fair value of RM5.15 on Axiata for now due to limited upside to Axiata’s regional growth prospects and lingering regional regulatory risks.



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KLCI extends loss at mid-morning as investors stay on sidelines

KUALA LUMPUR (Jan 31): The FBM KLCI extended its losses at mid-morning on Tuesday, albeit marginally as investors stayed on the sidelines ahead of the Federal Territories day holiday on Wednesday that would see the local stock market closed.

The FBM KLCI shed 1.31 points to 1,512.24 at mid-morning, weighed by select blue chips.

Gainers trailed losers by 206 to 214, while 263 counters traded unchanged. Volume was 336.38 million shares valued at RM209.43 million.

Meanwhile, Asian shares and the euro struggled on Tuesday as stumbling talks on Greek debt restructuring reignited concerns over funding in other highly indebted countries, with markets starting to worry that Portugal might need a second bailout, according to Reuters.

At the regional markets, Japan’s Nikkei rose 0.43% to 8,831.00, Hong Kong’s Hang Seng Index up 0.93% to 20,348.00, the Shanghai Composite Index gained 0.41% to 2,294.42, Taiwan’s Taiex rose 0.85% to 7,470.51, South Korea’s Kospi added 0.88% to 1,957.55 and Singapore’s Straits Times Index edged up 0.13% to 2,891.94.

BIMB Securities Research on Tuesday said that unresolved negotiation over Greece’s debt remains as the main obstacle for many equity markets.

There was some progress within the EU as most countries had signed a financial pact to strengthen the region’s financial standing, it said in a note.

It said investors were now more risks tolerant as many would still prefer to accumulate stocks on weaknesses, as reflected by the Dow Jones Industrial Average’s intra-day rebound erasing earlier losses to end the session 7 points lower.

The research house said as for European bourses, selling continued to hinder performances as most closed lower.

As expected, regional bourses succumbed to bouts of profit taking following a weak opening in Europe with no fresh catalysts in sight, it said.

“For Malaysia, the FBM KLCI broke its immediate resistance of 1,515 to end the day with a 7 points loss at 1,513.

“We expect the index to remain rather flat today from the lack of fresh leads,” it said.

Meanwhile, Maybank Investment Bank Bhd head of retail research and chief chartist Lee Cheng Hooi in a note to clients Tuesday said the FBM KLCI’s resistance areas of 1,513 and 1,530 would cap market gains, whilst weaker support areas may be located at 1,493 and 1,510.

“Due to the US markets’ mildly negative tone last night, we could be in for yet another range bound trading day before the City Day holiday tomorrow,” he said.

On Bursa Malaysia, BAT was the top loser at mid-morning and fell 28 sen to RM49.10; PPB fell 18 sen to RM16.72, Perstima 13 sen to RM3.77, MPI 12 she to RM3.56, Hong Leong Bank 10 sen to RM11.40, JobStreet, Tenaga and Petronas Dagangan down eight sen each to RM2.10, RM5.89 and RM17.62, while TSR Capital fell six sen to 87 sen.

Gainers included Glenealy, Malayan Flour Mills, Petronas Gas, Mudajaya, Coastal Contracts, Triplc, Plenitude, CBIP and Aeon, while the actives included DBE Gurney, DRB-Hicom, TMS, Maybulk, Mudajaya and Coastal warrants.



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CIMB Research has technical sell on Maxis at RM5.56

KUALA LUMPUR (Jan 31): CIMB Equities Research has a technical sell on Maxis Bhd at RM5.56 at which it is trading at a a FY13 price-to-earnings of 17.4 times and price-to-book value of 5.4 times.

It said on Tuesday that there is a good chance that the uptrend from mid-November is coming to a temporary end.

“Yesterday, the stock violated its support trend line and this could entice greater selling pressure ahead. If the candles fail to bounce back above this support-turned-resistance trend line soon, we think that the stock is poised to correct towards RM5.36 and RM5.15,” it said.

CIMB Research also said the moving averages at RM5.55 to RM5.46 were also a magnet for prices.

“Indicators are showing signs of exhaustion. MACD is poised for a negative crossover while RSI has hooked downward.

“Traders should do well taking some profits now. However, always put a buy stop at RM5.80, just in case,” it said.



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Public Bank up on record earnings, interim dividend

KUALA LUMPUR (Jan 31): PUBLIC BANK BHD [] shares rose on Tuesday recorded net profit of RM876.98 million in the fourth quarter ended Dec 31, 2011, up 3.6% from a year ago due to higher net interest and net income from Islamic banking business.

At 9.15am, Public Bank added eight sen to RM13.60 with 47,500 shares traded.

The banking group on Monday declared a second interim single-tier dividend of 28 sen per share.

Its revenue rose 11.8% to RM3.32 billion from RM2.97 billion a year ago. Its earnings per share were 25.04 sen compared with 24.16 sen.

MIDF Research has maintained its Neutral rating on the stock but adjusted the target price (TP) to RM13.30 (previously RM13.00) after tweaking its FY12 BVPS higher to account for a slightly higher FY11 net profit than our forecast.

“Our TP implies an ROE of 23.0% for FY12.

“We continue to peg the stock to a forward PBVR of 2.8x and PER of 13.0x. Our forward PBVR of 2.8x is lower than the PB multiple during the financial crisis period (2008-2009) of 3.1x,” it said.

The research house said Public Bank’s NIM (inclusive of Islamic banking income) in 4QFY11 was marginally 2.6% (3QFY11: 2.7%). The group’s NIM is expected to remain under pressure, it said.

“While the competition for retail loans is expected to ease off with the introduction of guidelines on responsible financing for retail loans, we believe that competition for deposit will remain in intense for at least the next two quarters of FY12 due to Basel III which requires banks to have stability in funding and liquid assets,” it said.



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CIMB Research has technical sell on DiGi.com at RM3.94

KUALA LUMPUR (Jan 31): CIMB Equities Research has a technical sell on DiGi.com at RM3.94 at which it is trading at a FY13 price-to-earnings of 16.4 times and price-to-book value of 23.5 times.

It said on Tuesday that DiGi was consolidating in a bearish flag pattern, suggesting that buying momentum was losing pace.

“If the support trend line (now at RM3.90) gives way, there is a high possibility that the stock may correct towards RM3.74 and RM3.44,” it said.

CIMB Research said selling pressure was expected to accelerate if prices fall below its moving averages at RM3.82 to RM3.73.

“Risk adverse investors may start to lock in some profits now. Put a buy stop at RM4.05, just in case.

“Indicators are deteriorating. MACD shows a bearish divergence while RSI has also turned flattish,” it said.



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CIMB Research has technical buy on SBC Corp at 94.5 sen

KUALA LUMPUR (Jan 31): CIMB Equities Research has a technical buy on SBC Corp at 94.5 sen at which it is trading at a price-to-book value of 0.3 times.

It said on Tuesday that SBC Corporation broke out of its consolidation triangle pattern on Monday on strong volume.

“We view this as a prelude to more upside ahead. If we are right, there is a good chance that prices may re-rate towards 99.5 sen and RM1.04 in the medium term,” it said.

CIMB Research said the MACD signal line was picking up, suggesting that buyers were slowly making a comeback. RSI was also above the 50 points mark, it added.

“Any pullback towards its key moving averages at 91.5 sen to 89 sen is an opportunity to accumulate. Be quick to cut loss if 88.5 sen is breached,” it said.



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Perstima retreats on weaker 3Q earnings

KUALA LUMPUR (Jan 31): Perusahaan Sadur Timah Malaysia (Perstima) Bhd shares retreated on Tuesday after the its net profit for the third quarter ended Dec 31, 2011 fell 42.95% to RM7.99 million from RM14.01 million a year ago, due mainly to lower sales volume coupled with lower profit margin.

At 9.10am, Perstima shed 10 sen to RM3.80 with 7,300 shares done.

Its revenue for the quarter slipped 9.4% to RM204.26 million from RM225.47 million in 2010.

For the nine months ended Dec 31, Perstima’s net profit fell 48.6% to RM30.55 million from RM59.42 million in 2010, while revenue was 3.51% lower at RM621.77 million from RM644.43 million.

Reviewing its performance, Perstima on Monday said its lower profit margin was due to the increase of production cost which was higher than the increase in selling price in order to remain competitive against importation in the market.

On its outlook, Perstima said it expects its operating environment to remain challenging and competitive due to lower tinplate price from China and Korea as well as the expected economic downturn in the global market.



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Malaysian Pacific Industries shared dip in early trade

KUALA LUMPUR (Jan 31): MALAYSIAN PACIFIC INDUSTRIES [] Bhd shares retreated in early trade on Tuesday after the company said that it expects its business prospects to remain challenging across all segments for the financial year ending June 30, 2012 given the uncertain macro-economic outlook.

At 9.05am, MPI fell 13 sen to RM3.55 with 55,000 shares done.

MPI posted net loss RM16.21 million in the second quarter ended Dec 31, 2011 compared to net profit RM25.29 million a year earlier, due mainly to weaker demand and lower revenue.

Its revenue for the quarter fell 24.04% to RM279.23 million from RM367.59 million in 2010. Loss per share was 8.37 sen compared to earnings per share of 13.05 sen, while net assets per share were RM3.77.

Reviewing its performance, MPI said while the weak semiconductor market was affecting all its segments, many of the manufacturing hubs in Asia were shutting down towards the end of December to adjust for the lower demand.

“This, coupled with the general inventory correction in the industry, has further impacted the supply chain and revenue of the sub-contracting business during the quarter under review,” it said.



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HDBSVR: KLCI could extend slide after weak Wall Street

KUALA LUMPUR (Jan 31): HwangDBS Vickers Research said the weaker overnight close on Wall Street would weigh on regional markets including Bursa Malaysia.

It said on Tuesday the FBM KLCI could extend its slide. The benchmark index – which tumbled 7.4 points on Monday – may make its way towards the psychological support level of 1,500 ahead, it said.

On Wall Street, major U.S. equity indices were down between 0.1% and 0.3% amid concerns of slow progress in Greece’s debt negotiations.

HDBSVR said in terms of news flows, Bank Negara Malaysia is scheduled to hold its monetary policy committee meeting on Tuesday evening, with expectations for the policymakers to keep interest rates unchanged.

On the corporate front, of interest will be stocks including Malaysia Airports Holdings, which has proposed to raise funds via a private placement exercise of up to 110 million new shares (for gross proceeds of approximately RM598 million).

In Tenaga Nasional, its CEO indicated that he would be quitting when his contract ends in June

MALAYSIAN PACIFIC INDUSTRIES [] reported net loss of RM16 million in the October-December quarter, while its share price jumped 34% over the last two weeks.



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RHB Research maintains Outperform on Public Bank

KUALA LUMPUR (Jan 31): RHB Research Institute said Public Bank’s 4Q11 results were in line with its and consensus estimates but the interim net dividend per share of 28 sen declared was below its expectations of 31.5 sen.

“Full-year net payout was 48.3%, below our 52.5% assumption, which we suspect was partly to conserve capital as Bank Negara Malaysia has yet to announce its stand on the counter-cyclical buffer,” said the research house on Tuesday.

RHB Research said for 2012, Public Bank management guided for loan growth of 12%-13%; deposit growth in line with loan growth; net interest margin squeeze of 10 to 15 basis points; and dividend payout of close to 50%.

“Management does not expect the new guidelines/measures introduced thus far to significantly impact loan growth.

“We tweaked our projections but the impact is not significant. Fair value raised to RM14.10 from RM14 after we updated our 2012 book value. Maintain Outperform,” said the research house.



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RHB Research maintains market perform on MPI, FV at RM3.47

KUALA LUMPUR (Jan 31): RHB Research Institute is maintaining its market perform outlook on MALAYSIAN PACIFIC INDUSTRIES [] (MPI) Bhd while its fair value estimate was raised to RM3.47.

The research house said on Tuesday its FV estimate was raised after it had increased the benchmark forward target price-to-book value from 0.8 times to 1.0 times.

On Monday, MPI reported a 6MFY06/12 net loss of RM25.8 million on the back of weak demand for MLP and broad-based packages due to slumping sales for electronic devices during the quarter.

“We would not be surprised if management guides for a revenue decline of 5%-10% qoq for 3QFY06/12 at the briefing later Tuesday, similar to peers’ recent guidance.

“We reduced our FY06/12 net profit forecast from RM6.5 million to RM2.5 million. However, we have maintained our assumptions of a pick-up in 2HCY12, and thus our FY13-FY14 estimates are relatively unchanged,” said RHB Research.



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Stocks to watch: MAHB, Public Bank, MPI, Axiata

KUALA LUMPUR (Jan 31): Stocks on Bursa Malaysia could trade on a cautious note on Tuesday following investors’ disappointment over the absence of a Greek debt deal, though the broader market was firmer with interest in lower liners.

Reuters reported that dampened optimism about the global economic picture and the Greek crisis pushed the euro off six-week highs and sent world stocks lower on Monday with investors cautious ahead of an EU leaders’ summit.

EU leaders will sign off on a permanent rescue fund for the euro zone at a summit on later on Monday and are expected to agree on a balanced budget rule in national legislation, with unresolved problems in Greece casting a shadow on the discussions.

As for Bursa Malaysia, the FBM KLCI fell 7.33 points to close at 1,513.55, weighed by losses including at Genting, Hong Leong Bank and HLFG. However, gainers led losers by 460 to 387, while 310 counters traded unchanged. Volume was 2.31 billion shares valued at RM1.84 billion.

Among the companies which could see trading interest are Malaysia Airports Holdings Bhd (MAHB), PUBLIC BANK BHD [], MALAYSIAN PACIFIC INDUSTRIES [] Bhd (MPI) and Axiata Group Bhd.

Other stocks of interest would be Perusahaan Sadur Timah Malaysia (Perstima) Bhd, D’nonce TECHNOLOGY [] Bhd and also JOTECH HOLDINGS BHD [], and AIC CORPORATION BHD [] and AutoV Corporation Bhd.

MAHB plans to raise RM598.40 million from a proposed share placement exercise to finance the new low cost carrier terminal at Kuala Lumpur International Airport (klia2).

The airports operator said it planned to issue 110 million new shares, or 10% of its issued and paid-up share capital to investors to be identified via a book building exercise.

Based on a 5% discount to the five-day volume weighted average market price (VWAMP) of MAHB shares up to and including Jan 27, of RM5.7298, the indicative issue price for the placement shares would be RM5.44.

Public Bank Bhd recorded net profit of RM876.98 million in the fourth quarter ended Dec 31, 2011, up 3.6% from a year ago due to higher net interest and net income from Islamic banking business. It declared a second interim single-tier dividend of 28 sen per share.

Its revenue rose 11.8% to RM3.32 billion from RM2.97 billion a year ago. Its earnings per share were 25.04 sen compared with 24.16 sen.

For the 4Q ended Dec 31, 2011, the group registered a pre-tax profit of RM1.163 billion, an increase of RM33.0 million or 2.9% as compared to the previous corresponding quarter. The improved performance was mainly due to higher net interest and net income from Islamic banking business.

MPI posted net loss RM16.21 million in the second quarter ended Dec 31, 2011 compared to net profit RM25.29 million a year earlier, due mainly to weaker demand and lower revenue.

Its revenue for the quarter fell 24.04% to RM279.23 million from RM367.59 million in 2010. Loss per share was 8.37 sen compared to earnings per share of 13.05 sen, while net assets per share were RM3.77.

Axiata Group Bhd has received another two-year extension from the Securities Commission (SC) to get the local authorities’ approval for its outdoor structures.

The SC had given it until Jan 29, 2014 to get the approvals for the outdoor structures, which were part of the conditions for its listing on Bursa Malaysia.

As at Dec 19, 2011, Axiata said 22 outdoor structures were pending approval from local authorities. Applications for 27 outdoor structures have been declined, and the Celcom Group is in the midst of appealing to the relevant local authorities.

Perstima’s net profit for the third quarter ended Dec 31, 2011 fell 42.95% to RM7.99 million from RM14.01 million a year ago, due mainly to lower sales volume coupled with lower profit margin. Its revenue for the quarter slipped 9.4% to RM204.26 million from RM225.47 million in 2010.

D’nonce Technology Bhd posted net loss of RM6.11 million in the first quarter ended Nov 30, 2011 compared with a net profit of RM498,000 a year ago due to the impact of the severe flooding in Thailand last year.

Its factories in Bangkok were inundated by the flood waters which damaged its property, plant and equipment and inventories in early October 2011. As to date, its factories in Bangkok have yet to commence operations.

Datuk Goh Tian Chuan’s special purpose vehicle Temasek Formation Bhd (TFB) has received the Securities Commission’s approval to merge Jotech Holdings Bhd, and AIC Corporation Bhd and AutoV Corporation Bhd.

The proposed merger of the three companies for a total consideration of about RM696 million would be satisfied via the issuance of new Temasek Formation shares.



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